Stocks seen to test support at 6,600

MANILA, Philippines — The Philippine Stock Exchange index (PSEi) may test the 6,400 to 6,600 support levels, which protect the structural integrity of the underlying upward trend over the past three and a half months, according to Rizal Commercial Banking Corp. chief economist Michael Ricafort.

The PSEi eased for the fourth straight day by 239.22 points or 3.5 percent to close at 6,612.62 last week. This was near  the three-month lows or since Nov. 6, 2020.

It declined for the third straight week by 433.21 points or 6.1 percent after the previous week’s 2.7 percent.

Ricafort cited several factors for the market’s performance, which include the continued economic contraction.

Although partly priced in by the markets beforehand, this  could still indicate relatively slower economic recovery, Ricafort said.

The softer net foreign portfolio investments or hot money data also partly weighed on market sentiment, he said.

He also said that the general community quarantine maintained in Metro Manila until February 2021 could still lead to a relatively slower economic recovery prospects.

“New COVID-19 local cases recently lingered near 2,000 per day levels, among the highest in about two months as well as the detection of the new local cases of the more contagious UK coronavirus variant added to investor concerns,” he said.

Major external factors also caused some healthy downward correction, especially for US stock markets that were posting new record highs in the early part of the week.

“US stock markets corrected lower to two to three-week lows, but still among record highs, after softer US economic data, after the biggest daily sell-off since October 2020 on Jan. 27, 2021, by at least two percent, amid losses on some short sellers,” Ricafort said.

Furthermore, Federal Reserve chairman Powell signaled that the US economy is a long way to full recovery.